The Go2 Adviser: A new kind of business advice. Part 2: Cash flow. In association with

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1 The Go2 Adviser: A new kind of business advice Part 2: Cash flow In association with

2 Cash flow: 3 key points for the Go2 Adviser Get in control of cash flow Don t just do the books; help clients get in control of cash flow. Unlock the historical intelligence hidden in their data and keep them on top of their incoming, outgoing and future cash, take a methodical approach to contracts and payment terms, and plan for seasonality. You can completely turn around the profitability of their business at a stroke. Bring cash in when it s really needed Speed up clients invoicing and get them paid quicker. By reviewing, restructuring and streamlining their invoicing processes and systems you can save them hours of admin. And get them paid more quickly, improving the overall health of their cash flow at the least profitable times of year. Proactive and timely debt chasing Take a proactive approach to chasing debts and outstanding payments. Outstanding debts leave a big hole in your client s cash flow; a huge issue at times of the year where sales are slow and income is low. Help clients set up innovative ways of tracking those debts and automating their credit control. 2

3 Why is cash flow an issue for your clients? As we head into the holiday period, the warning lights should go on for business clients that see seasonal dips in their sales bookings and cash collection at this time of year. Seasonality has a big impact on sales across a wide range of sectors, but recent research showed that over a third (36%) of UK small business don t prepare fully for the effects of seasonal drops in their cash flow 1. Educating clients on broader ways of taking payment, such as card or direct debit can greatly improve their cash flow. The easier your clients make it for customers to pay, the more quickly they ll see the money in the bank. Your clients need a tight rein over their cash flow, a great overview of their outstanding debts and the strategic flexibility to access the right cash to get them through any lean periods. And this is where your practice can add real value for clients that need advice on cash management. Cash flow fluctuates over time The sooner your clients get paid, the better their cash flow will look. Having this steady flow of regular payments coming into their bank account provides the funds to drive the company forward. But cash flow fluctuates, and having a clear view of forecasted cash flow, alongside good cash management, is the best way to keep on top of unexpected dips. 3

4 Poor cash flow holds back growth Every business has regular, ongoing costs to pay. Whether it s a payroll bill, supplier invoices or new machinery for their factory, there s a constant need for cash to pay these overheads. Without a steady stream of good cash flowing into the coffers, the business can t pay its way, can t make profits and can t afford to invest in growth. As their business adviser, you can add great value by advising on the positive impact of good cash flow and how it allows investment, growth and expansion. Cash flow reflects the overall health of the business A detailed view of cash flow reveals the underlying health of a client s company. Slow, irregular cash flow can be the death knell for many companies, whereas as a steady, stable flow predicts good future profits. Having that regular, monthly view of the cash pipeline highlights potential topical issues or provides a green light to investment and future spending on the business. 4

5 How will your clients be affected? When business owners have a poor grasp of their own cash flow, this has a serious impact on both the business and the people managing it. As we move toward the end of the year, low sales and bad cash flow can easily lead to a business ending up hugely in debt, crippling their growth plans, threatening jobs and even bringing the grim prospect of insolvency. Seasonal dips There are points in year where sales will suffer usually the summer months and the Christmas period for most businesses. With drastically reduced sales income coming into the business, your clients will end up needing to plug a cash gap just in order to keep the business running, their overheads covered and the payroll paid and that s going to cause stress and worry. Cross your fingers and pray Business owners and MDs are rarely financial specialists. So they are likely to lack the cash management skills needed to plan for seasonal changes or poor sales figures. Running a company with your fingers crossed, hoping that the necessary cash will appear when needed, is risky at best, and potentially fatal at worst. No cash: no business A business without a regular income of ready cash has little chance of survival in a competitive marketplace. In fact, recent research suggests that over half (55%) of new businesses don t survive the first five years 2. So, planning ahead, understanding the impact of fluctuating sales revenue and managing your existing cash effectively will be vital for long-term survival. 5

6 How you can help By bringing your financial and commercial experience to bear on client s cash flow, you can turn around their fortunes. Even the most ambitious client can be affected by changes in sales income, dips in cash flow and the need for fast access to the right funding. Your advice can help clients plan more effectively and deliver that much needed cash when it s most needed. Help them think like an FD. If you can help clients to think through the financial implications of their business decisions and think more like an FD you ll go a long way to making their business more efficient and financially viable in the long term. Choice of payment methods. Encourage your clients to offer multiple ways to pay for goods and services such as card payments and direct bank payments using services such as GoCardless. Risk-profile their clients. Show clients how to research, screen and filter their clients up front. By choosing to work with the most profitable (and least risky) customers, they can create a client base that s easy to manage and brings in the best revenues. Plan for seasonality. Understanding the seasonal nature of a sector, and knowing when to plan for reduced sales and low cash flow forecasts, means your clients are prepared and ready to act. You can help them to plan and keep cash in reserve. 6

7 Get their pricing right. The wrong price can kill a client s cash flow. Too low and there s not enough cash coming in; too high and they won t make any sales. You need to find a price point that customers will pay and reflects the value they re getting. Structure contracts better. Proposals, quotes, contracts and engagement letters need to benefit your client, not their customer. Advise clients on creating contracts that make it clear what work/services will and won t be supplied (and what the extras will cost). Get the right accounting software. Moving clients to cloud accounting gives you a great starting point for improving their cash flow. Accounting software puts their numbers in one place, so they have a far better overview of their current sales and spending. Get the right tools and plug-ins. Cloud accounting software can be expanded and enhanced with a range of additional business tools and plug-ins. Create a bespoke system with the right tools for each client, whether it s expense claim apps, financial reporting tools or time-saving, data automation plug-ins like Receipt Bank. Provide monthly cash flow reports. Use financial intelligence software, like Gearshift, to run regular cash flow reports for clients. Meet with the client to deliver these so you can demystify those numbers, talk through any current issues and suggest solutions. Give insightful strategic advice when it s needed. Get to know each client s business in more detail and learn the times of year when they most need your guidance. The right strategic cash advice, at the right time, can work wonders on their revenues. 7

8 Get clients paid quicker when cash is low. Help clients get paid faster by updating their invoicing processes and making them more efficient. Use online invoicing and show how ing bills to a customer s finance team gets your invoices paid more swiftly. Chase big debts when they re needed most. Run regular reports for clients showing the big debts they need to prioritise. Teach their finance team to be more proactive about chasing debts, provide strategies for speeding up payment and plug their cash flow gap. Automate clients credit control. Explore the benefits of using embedded credit control tools within bookkeeping software such as KashFlow to completely automate your client s credit control and debtor tracking. Boost their cash flow with minimal admin and time spent chasing payment. 8

9 Must-do actions for the Go2 Adviser Most businesses have a tough time in the fallow period of January through to February. So, at a time when sales historically tend to drop, there s never been a better time to deepen your business relationship with your clients and start giving them the information and guidance that will see them through the start to another year of trading. Here are three important actions to take if you want to start offering more in-depth strategic advice and building on your advisory relationship with clients. 1. Invest in the right software. Small business clients are increasingly tech-savvy. They ll expect real-time numbers, instant access and detailed reporting as standard and for that you need to make the move to cloud accounting software like KashFlow, coupled with add-ons like GearShift. You ll get an improved view of clients business information, allowing you to spot the big issues and give concrete advice on cash flow problems and cash management: it s the key to becoming a valued business adviser. 2. Have timely cash conversations. You need to talk cash at the right times. Meeting with your client s once a quarter, or even once a year, doesn t cut the mustard any more. Schedule regular cash flow meetings with clients so you have the best possible understanding of their business and the seasonal changes in their sector. Understand their cash needs and put the right planning in place to deal with cash flow dips. 9

10 3. Provide informed strategic insight and cash guidance. Clients will expect you to prime them about any potential cash issues. Cloud accounting supplies the core numbers. Financial intelligence delivers the reporting insight. And you provide the strategic advice they need to overcome their cash flow hurdles and shape a more financially stable future for these clients (and a stable income stream for your practice). 10

11 Find out more IRIS KashFlow, teamed with GearShift, is a great financial centre for your clients cash flow needs. You can find out more about Kashflow at 11